Asia-Pacifc Effort for Inclusive Economies

By Tang Guoqiang and Wang Zhenyu



Asia-Pacifc Effort for Inclusive Economies

By Tang Guoqiang and Wang Zhenyu

On November 21， 2015， the 18th China-ASEAN （10+1） leaders' meeting was held in Kuala Lumpur， Malaysia.

The 23rd APEC Economic Leaders'Meeting was held on Nov 18-19 in Manila with the theme of “Building Inclusive Economies and Building a Better World”. Regional economic integration was high on the agenda. Connectivity， a hot topic in international economic cooperation，is an indispensable element for construction of the broader international community.

Deepening Regional Economic Integration

In 2014， China hosted the 22nd summit in Beijing. It was a meeting striving for new progress. Participants summed up the successful experiences of APEC in the past 25 years since its establishment， drew up a blueprint for jointly developing the Asia-Pacific partnership oriented toward the future， and made big progress in promoting regional economic integration in the Asia-Pacific by endorsing the Beijing Roadmap for APEC's Contribution to the Realization of the FTAAP （hereinafter referred to as “Beijing Roadmap”）.

The Beijing Roadmap points out the direction for economic cooperation in theAsia-Pacific region when the Bogor Goals are attained in 2020. Te FTAAP has actually become the new goal of APEC regional integration.

It contains four main tasks: launching a collective strategic study on issues related to the realization of the FTAAP （hereinafer referred to as “collective strategic study”）， accomplishing and promoting the APEC Information Sharing Mechanism by 2016， carrying out capacity building activities and strengthening institutional connectivity. This year， the Philippines followed APEC's tradition of implementing the fruits of previous meetings when setting the agenda. In regional economic integration， efforts were made to implement the priority tasks in 2014.

In the past year， China has made positive efforts in encouraging all parties concerned to put the Beijing Roadmap into practice， including taking the lead in setting up a number of working mechanisms such as a Committee on Trade and Investment （CTI）， Friends of the Chair Group on Strengthening Regional Economic Integration （REI） and Advancing FTAAP， as well as a relevant research group and core drafting group， while working together with the US to act as chairpersons of the afore-mentioned mechanisms； drafting and pressing ahead with the adoption of the outline， frame structure， chapter planning，drafing methods and fnal goals of the collective strategic study to lay a solid foundation for the smooth implementation and timely accomplishment of the collective strategic study；earnestly promote the FTAAP Information Sharing Mechanism and capacity building to effectively facilitate FTAAP progress. China held a workshop in Cebu at the end of August，further consolidating consensus.

Te report is being written now. Te draf is expected to be fnished in January 2016 and the fnal version by the end of October， and be submitted to the APEC Summit for deliberation in December.

A comprehensive， quality， balanced and inclusive FTAAP will bring benefits to all economies. Investigations show that once the FTAAP is set up， the economic benefts will far exceed other sub-regional free trade arrangements in the Asia-Pacifc region. Cases in point include the US-led Trans-Pacific Partnership Agreement and ASEAN's Regional Comprehensive Economic Partnership（RCEP）. With the establishment of FTAAP，the GDP of its members will increase by about 3.5 percent， several times the economic benefts created elsewhere.

Accelerating FTAAP Progress

As APEC members have gained a better understanding of the overall situation and trend of regional economic cooperation and integration， they have come to better understand the FTAAP. Various economies， in particular developing ones， based on their domestic conditions， have put forward a number of important proposals:

The FTAAP should constitute further development and extension of the Bogor Goals set by APEC economic leaders in 1994，providing support and complementing the multilateral trading system. The purpose is to overcome fragmentation， bridge the gap between various economies and establish a

FTAAP should have comprehensive and high-quality goals giving due consideration to the next-generation agenda. Moreover， the realities of diferent regions should be considered so that the goals will be realized by stages and in a fexible and gradual manner.

During the realization of the FTAAP， various free trade arrangements should enhance exchanges， mutually promote each other and avoid politicization of economic and trade arrangements so as to prevent improper competition and confrontation among various economies.

On November 18， 2014， the frst Yiwu-Xinjiang-Europe cargo line train set out from Yiwu，China for the Spanish capital 13，052 km away.

As a comprehensive free trade agreement，the FTAAP will be built on the established regional trading arrangements and those under free trade area with the most population， most diversified membership， most different levels of economic development， and greatest development vitality.

FTAAP construction should fully consider the diference of development among various economies， give due respect to the special needs of developing countries， and encourage joint eforts by all relevant parties on the basis of equal participation， full consultation， openness and inclusiveness in pursuit of common development. The FTAAP should not be closed and exclusive. Eforts should be made to create an open economic pattern in the Asia-Pacifc.

negotiation. “10+3”， RCEP， and TPP are all possible paths to construct the FTAAP， which should give full scope to their integrative role.

As the highest-level and most influential forum for economic and trade cooperation with the widest coverage in the Asia-Pacific region， APEC has always sought to promote regional economic integration. We believe that， with concerted eforts， FTAAP construction will move forward continuously. We also expect that the collective strategic study can be completed as planned by the end of 2016， presenting feasible proposals and strategic plan.

In 2014， President Xi Jinping called for fulfllment of the Asia-Pacifc dream at the BeijingAPEC Summit， an effort which was made to forge an Asia-Pacific partnership of mutual trust， inclusiveness and win-win cooperation，and achieve the common goals of the FTAAP in an open， transparent， pragmatic and gradual manner. China will continue to work hard with the other APEC members to accelerate FTAAP construction， deepen regional economic integration， build an open economic pattern in the Asia-Pacifc and inject new vigor into global economic development in order to achieve common development， prosperity and progress.

Two-wheel to Four-wheel Drive

Traditionally， APEC economic cooperation has mainly relied on the two wheels: trade and investment liberalization and facilitation，economic and technical cooperation. Since the global financial crisis， economic growth and connectivity construction have been incorporated into APEC cooperation. Te 2014 APEC Economic Leaders' Meeting endorsed the Beijing Agenda for an Integrated， Innovative and Interconnected Asia-Pacific which has two important annexes -APEC Accord on Innovative Development， Economic Reform and Growth and APEC Connectivity Blueprint for 2015-2025 （hereinafter referred to as“Blueprint”）. Tus APEC economic cooperation has gained two more wheels， thus shifing its original two-wheel drive to the current fourwheel drive.

Connectivity specifically contains the following three aspects: frst， physical connectivity. Efforts should be made to enhance the interconnection and integration of infrastructural facilities including logistics， energy and telecommunications internally and between economies so as to improve efficiency and benefit the supply chain. Second， there is institutional connectivity. Various economies should join hands in strengthening coordination and unification of institutions and procedures in a bid to make doing business much easier and facilitate trade， services and investment. Third， there is people-to-people connectivity. Work should be done to ease existing barriers to interaction and mobility and to develop joint endeavors that will support seamless cross-border fow of people.

Connectivity construction， an urgent need of Asia-Pacifc economies， can bring huge benefts. According to World Bank research， a 10 percent increase in infrastructural investment leads to one percentage point growth of GDP. Against the backdrop of global economic downturn， it is undoubted that institutional connectivity will efectively promote economic growth. Tere is a huge infrastructural investment gap in the Asia-Pacifc and the world at large. Te World Economic Forum （WEF） estimated that the global investment gap remains at $1 trillion on a yearly basis. According to the Asia Development Bank （ADB）， the infrastructural investment gap in Asia will exceed $8 trillion between 2010 and 2020. Te World Bank report pointed out that every 10 percent increase in the connectivity of the supply chain adds about $21 billion growth of GDP to APEC economies. According to the report jointly made by the UN World Tourism Organization and World Travel and Tourism Council， due to visa facilitation， APEC economies will see another 38-57 million international tourists by 2016， which will bring about $62-89 billion in revenue and create 1.8-2.6 million job opportunities. It is fair to say that connectivity construction will bring more benefts than just eliminating duties.

Thailand hosted 22 million foreign visitors in 2015. Jin Haiyu， a post-90's girl from Beijing got an unexpectedly warm welcome upon arrival in Bangkok with her boyfriend on September 30.

Realization of Connectivity

Cooperation on physical， institutional and people-to-people connectivity started from the 2013 Indonesia APEC Summit that adopted two policy documents -APEC Framework on Connectivity and APEC Multi-year Plan on Infrastructure Development and Investment. Te former put connectivity construction high on the APEC agenda， while the latter， actually a substantial result of the former， pays more attention to infrastructure fnancing.

In 2013 China actively supported Indonesia to promote APEC cooperation on connectivity. During the official visit to Indonesia before the APEC Summit， President Xi Jinping proposed to establish the Asia Infrastructure Investment Bank （AIIB） and join hands with ASEAN countries in building the 21st Century Maritime Silk Road， sparking great interest in and high expectations for connectivity. Both countries also gave full consideration to continuity in policy making.

In 2014， APEC successfully drew up the Blueprint as “a strategic guide for current and future initiatives that will bring the APEC region closer together， and as a high-level framework towards which many APEC work streams will focus their eforts”. Featuring the plan for the cooperation on connectivity in the next ten years， the Blueprint has a broad vision， being both ambitious and pragmatic. On physical connectivity， more attention was paid to the cooperation on the infrastructure construction financing mechanism， energy，information and communications technology， and transportation infrastructure. On institutional connectivity， the focus was on major issues related to “trade facilitation，structural and regulatory reforms as well as transport and logistics facilitation”； at the same time， specifc initiatives were presented to modernize customs and border agencies，develop one Single Window system， improve

On June 29， 2015， Minister of Finance Lou Jiwei （center） signed the Agreement of the Asian Infrastructure Investment Bank on behalf of China. Representatives of 57 prospective founding members attended the signing ceremony in Beijing.

China will continue to work hard with APEC members to speed up the construction of the Free Trade Area of the Asia-Pacific （FTAAP）， deepen regional economic integration， build an open economic pattern in the Asia-Pacific region， and inject new vigor into the sound development of global economy in pursuit of common development， prosperity and progress. supply chain performance， enhance regulatory cooperation， make doing business easier，improve the market environment and cope with the challenges raised by the Middle-Income Trap （MIT）. On people-to-people connectivity， initiatives were included to address the issues of business travel mobility，cross-border education， tourism facilitation and skilled labor mobility. Te Blueprint contains the proposals on intensifying capacity building and carrying out cooperation with the private sector among various economies with a view to propelling the implementation of relevant initiatives； determines the mechanisms for monitoring， evaluation and review and appoints Ministers and Senior Ofcials to develop a dedicated arrangement to monitor，review and evaluate the implementation of the Blueprint.

During the 2014 APEC Economic Leaders' Meeting， China echoed the progress of APEC connectivity agenda by holding activities related to the Belt and Road Initiative and the AIIB.

2015 is the first year for APEC to implement the Blueprint. Since connectivity construction wasn't put high on the agenda of the 2015 APEC Economic Leaders'Meeting， no creative results had been achieved. However，relevant work is still moving forward. On institutional arrangement， APEC set up special arrangements for monitoring， evaluation and review and various economies submitted the evaluation report in 2015. On physical connectivity， APEC will continue to press ahead with infrastructure construction and highlight capacity building. On people-to-people connectivity， from Sept 1 this year， the APEC Business Travel Card will be extended from three years to fve years while APEC will reiterate the goals set by the 2014 APEC Tourism Ministerial Meeting in Macao， according to which， the number of international tourists to APEC members will reach 800 million by 2025. On institutional connectivity， APEC held the eighth Conference on Good Regulatory Practice （GRP）， facilitating the implementation of good regulatory practice among its members.

China continues to smoothly work in setting up the AIIB and earnestly promoting the Belt and Road Initiative. Many APEC economies have joined the process， and the APEC Ministerial Meetings confrmed China's contribution in the regard. As the Secretariat of Asia-Pacific Port Service， China helped to bring about the APSN Workshop on Gateway Ports and Supply Chain Connectivity in Nov 2014 and facilitated the holding of APSN Workshop on Improving Port and Supply Chain Connectivity in Nov 2015. China is also projected to have APEC Higher Education Research Center built at the end of this year，which is committed to promoting the mobility of students， researchers and education providers. Te extended validity of APEC Business Travel Card should be attributed to the joint eforts of Australia and China.

Given the situation this year， there is still a long way to go before achieving APEC-wide connectivity. Relevant economies， both developed and developing， have diferent opinions on the importance of connectivity， with different focuses. Te former pay more attention to institutional connectivity while the latter show greater interest in physical connectivity. Countries on the eastern side of the Pacific Ocean and those on the western side difer in attitude. Te former have developed a basis for long-term connectivity cooperation while the latter have made no substantial progress in this regard. Even if all parties reach consensus， their executive capability varies greatly. In the coming years， the hosts APEC Summits are mostly small developing economies. China and other active powers should make strengthened efforts in communicating and collaborating with them， building consensus and doing a good job in implementing the Blueprint so as to speed up the building of a seamless Asia-Pacifc community.

About the author:

Tang Guoqiang， President of the China National Committee for Pacifc Economic Cooperation

Wang Zhenyu， Associate Researcher of the China Institute of International Studies